Although blockchain browsers ensure transparency, they are not sufficient for the management of an investment process.
Akar Aydemir
Paribu Business Development Manager
Blockchain and cryptocurrencies provide both privacy and transparency, and this is one of the most significant advantages of this technology.
So how is it possible to ensure privacy and transparency at the same time?
Let’s have a look at Bitcoin, which is the flagship of cryptocurrencies.
Bitcoin meets the need for privacy as you do not have to sign any contract or share certain information with anyone to use it. All you need is a “public key” and a “private key”. It is that simple. Unless you disclose it yourself, no one would know that the address generated by that “public key” belongs to you. Thus, it meets the need for privacy.
On the other hand, all transfers made to an address can be monitored from the very beginning. In other words, all people around the world can easily monitor which address has generated the Bitcoin transferred to your account, which wallets it passed through until it reached your wallet, and where it is headed to from your address. This brings about the transparency that no other financial instrument could provide.
Blockchain browsers and “gossip network”
Blockchain browsers come to the forefront for their ability to meet the need for transparency. The developers of the blockchain browser set up the node of the blockchain for which they intend to provide browsing services – its features may vary depending on its type, though – and they, thus, receive information on all transfers in real-time through an infrastructure called the “gossip network”. The browsers are kept up-to-date about all the transfers because of the information conveyed by the neighboring nodes, and they communicate this information to the user through an interface that can easily be monitored by the user. As all the transfers carried out up to this point are registered in the relevant blockchain, it is possible to monitor them retrospectively.
In this respect, blockchain browsers significantly contribute to transparency and accessibility. Anyone can examine at any wallet any time, view the status of a transfer carried out from that wallet, display how many approvals it received and follow the recipient wallet’s relationship with other wallets. The entire journey of each Bitcoin, including those generated by Satoshi Nakamoto, takes place right in front of the users.
Investment decisions should not be based on “reading intention”
Some analysts often attempt to make predictions by speculating over the direction and volume of cryptocurrencies entering and leaving the wallets in the exchange markets. For this reason, users frequently follow “whale alert” accounts and bots. When a large volume of cryptocurrencies enters into an exchange market, people start to speculate: “They are going to sell”, “Market value is going to drop”, or “They are going to buy altcoins instead”, “The value of altcoins is going to increase”. All these comments may motivate users to try to gain profit from short-term movements. We cannot say whether such motivation is rightful or not because it would mean reading intentions.
In fact, whether such intention reading would achieve accurate results is rather doubtful. The reason is that the cryptocurrency market has become much more intricate than before although it still needs further progress. Prices take shape in thousands of platforms on a global scale, and just a few market movements may cause them to pass far beyond the price-setting stage.
A strategy based on sound arguments rather than speculations
|As in all other financial instruments, cryptocurrency prices are formed by supply and demand based on behavioral principles of finance. Making wrong decisions on impulse over short-term thrills is not a phenomenon of the last decade. It has been a part of the history of the economy for thousands of years.
Various scientific research suggested that irrational decisions made on impulse result from our reflexes, which have been formed over millions of years as part of our evolutionary process in the innermost layer called amygdala, not in the cerebral cortex, the outermost layer of our brain. Therefore, it is highly likely that decisions made by amygdala result in mistakes in today’s economic system.
As we have always emphasized, when making investment decisions, it is critical to act rationally by evaluating the pros and cons and forming our expectations based on seasons and climates rather than daily weather forecasts/conditions so that we can protect our investments and add more value to them.
It is valuable to benefit from various means of technology, watch/read the news, and observe market activities. However, what really matters is to create a strategy based on basic analyses and sound arguments, keep this strategy up to date, and stick to it unless otherwise is required by a serious and justifiable reason. We should not be expecting big results from some activity based on “speculations”.
It is critical to make sure that our decisions are sound and rational for a long-term and stable investments.
Bu içerik en son 26 October 2022 tarihinde güncellenmiştir.
